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The D-J Transportation Index - a Positive Move

By: Larry Cyna | Friday, January 18, 2013

The Dow Jones Transportation Average (DJTA)

Also called the "Dow Jones Transports", the DJTA is a U.S. stock market index
from Dow Jones Indexes of the transportation sector, and is the most widely
recognized gauge of the American transportation sector. It is the oldest stock
index still in use. This index hit its height of importance when railways across
America hit their peak and has been regarded ever since as a bellwether of
future movement in the major US stock indexes. As railways gradually declined
in importance, so did the Dow Jones Transportation Average. However to this
day, it is watched closely by veteran market players and remains an important
(if less relevant) indicator of the near term future of the stock markets.

A New High

Yesterday, the D-J Transportation Average (TRAN 5639.64) broke out to a new
all-time high. Its last peak was July 7, 2011 when it reached 5618.25. In past
decades, there would have been jubilation at this event with investors eagerly
buying stocks and anticipating profits. The event yesterday brought some muted
optimism and this is understandable given the dramatic meltdown and erratic
performance of the market in recent years.

What is does seem to indicate is that 2013 should be a good year for the markets,
and the economy should not slip into recession. This is yet another of the
many indicators that we have pointed out to show that, as in every previous
economic cycle, the USA is gradually but surely pulling itself into the next
boom.

The Dow Theory

Another important signal for stock market watchers is when the Dow Jones Industrial
Index also breaks out, and this has not yet happened. The Dow Theory calls
for both the Dow Jones Transportation Index and the Dow Jones Industrial Average
to hit new highs, and this is supposedly a very positive sign foretelling a
roaring bull market to come.

Green Shoots

So we have one sign and not the other at this point. Remember just after the
meltdown of 2008-9 when everyone was searching for 'green shoots'? Prior to
Mr Greenspan being anointed as Fed Chairman, economists generally expected
economic cycles to run in roughly 7 year cycles. Every 7 years or so, the economy
would slow down, and purge the excesses of the previous cycle, then gather
its strength and roar off to a new and higher cycle of economic activity. As
each successive cycle drew to a close, people were economically hurt and left
in its wake. In each of these cycles, believers were created who were sure
that prosperity was here to stay, and governed themselves accordingly, only
to discover to their chagrin that this cycle, like every other cycle in
the past, would come to a crashing halt.

Then we appointed the economic guru - Alan Greenspan - as Fed Chairman, who
decided that he was smarter than anyone else, and found a way to cease this
endless parade of economic cycles that brought prosperity and then devastation.
His solution - every time a weakness appeared in the economy, or some catastrophic
event occurred anywhere, Mr. Greenspan would print money - gobs of it - and
put that new money into circulation. The banks with lots of new free money
would look to use and lend this new money, and VOILA - the cycle continued
and economic prosperity continued after a short pause. The effect was that
the current economic cycle slowed a few times before it again roared off. When
the end came in 2007, and the policies of Mr. Greenspan,
which had created the longest boom cycle on record, then created the worst
and most painful crash in modern history. Now in 2013, we are still suffering
the pain of what was created.

One minor effect, was that the world grew used to expecting that every crash
would be followed quickly by a boom as Mr Greenspan pumped more money into
the system. After the crash of 2007, people kept watching for signs of the
rise of the new economic cycle and the term coined for these signs was 'green
shoots'. Economic pundits kept pouncing on this or that 'green shoot' expecting
that it was a sign of a new rebirth of prosperity. Alas, as the economic woes
just kept mounting, the number of green shoots grew less and less, and the
the term 'green shoots' fell out of use.

The Rebirth of Green Shoots

It is now going into the 6th year since Money Market Funds froze in the year
2007. Mr Greenspan's harm to the economy is finally fading, and indeed there
are finally some signs of economic growth. The Dow Jones Transportation Index
is indeed one of these signs, as are many of the other signs previously mentioned
in these blogs.

We are now in the beginnings of the next cycle bringing economic prosperity.
Those that retain their fear of a deepening crash, and those that believe that
holding gold is their only salvation, will miss this coming cycle and not be
participants in the coming prosperity.

Larry Cyna, CA, is CEO and Portfolio Advisor to Cymorfund, a boutique hedge
fund. He expresses his insights several times a week on his blog www.cymorfund.com and
offers a free newsletter which can be subscribed to here.

Mr. Cyna is an accomplished investor in the Canadian public markets for over
20 years, and has managed significant portfolios. He is a financing specialist
for private and public companies, and has expertise in real estate and debt
obligations. He has assisted private companies accessing the public markets,
has been a founding director of public companies and is a strategic consultant
to selected clientele.

He is and has been a director, a senior officer and on the Advisory Board
of a number of TSX and TSXV public companies in the mining, resource, technology
and telecommunications sectors, and the Founding Director of two CPC's with
qualifying transactions in mining and minerals. He was an honorary director
of the Rotman School of Management MBA IMC program, has completed the Canadian
Securities Institute Canadian Securities Course & Institute Conduct and
Practices Handbook Course, was a former Manager under contract to an Investment
Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory
Mediation Program, Toronto, a member of the Institute of Corporate Directors
of Ontario, a member of the Upper Canada Dispute Resolution Group, and the
Ontario Bar Association, Alternate Dispute Resolution section.

He obtained his designation as a Chartered Accountant in Ontario in 1971 and
was the recipient of the Founder's Prize for academic achievement together
with a cash reward. He became a CPA in the State of Illinois, USA in 1999
under IQEX with a grade of 92%. He is a Member of the Institute of Chartered
Accountants of Ontario and the Canadian Institute of Chartered Accountants.

He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty
of Law, University of Windsor, certificate in Dispute Resolution from the
Ontario Institute of Chartered Accountants. Previous accomplishments are Manager
of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO
of Cyna & Associates specializing in mediation and ADR; Founder & Senior
Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited
public accountancy firm with international affiliations; and was a partner
in a large public accountancy firm.

Mr. Cyna is well known in the Canadian Investing community. He attends presentations
given by public companies to the industry on a daily basis.. These presentations
are intended by the various hosting companies to present their inside story
for the purpose of attracting funding, or of making parties more interested
in acquiring shares of those companies. Being in constant communication in
this manner keeps Mr. Cyna deeply involved in the current market and leads
to numerous investment opportunities.

Mr. Cyna is currently a Director of Argentum Silver Corporation and Telehop
Communications Inc.